If you are a small business owner who needs distribution services for the first time, the process may seem a bit overwhelming. When you finally find a company to handle your warehousing and distribution needs, you may be tempted to sign any agreement you're presented with. However, before you sign a distribution agreement, make sure it includes the following three things:
1. Exclusivity Terms
Many distributors seek exclusivity when working with businesses. That way, they're the only ones shipping and warehousing your products in a given area. This can be good for your business, especially because your products won't be changing hands so much and tracking is easier.
However, it's important to outline the terms of exclusivity so that you and the distribution company are on the same page. For example, can you use another distributor for another product line? Can the distributor seek agreements with your competitors? Outlining terms can protect both sides legally, and help both sides understand the relationship in place.
2. Short Duration
Once you have found a distributor you think you can work with, you may want to sign a long-term agreement of a year or more. However, a short-term agreement might be a better idea for a number of reasons.
For one thing, a short term agreement allows you to get the hang of the entire process. You can then make changes to the agreement to reflect your company's success. If your business grows quickly and you want to expand your shipping options, for instance, you won't have to wait a year or more to make those changes. Of course, if you discover you would prefer another distributor, a short term agreement can make that easier.
3. Post-Termination Plan
If you do decide to terminate the agreement for whatever reason, you can't just walk away. After all, your products will still be in their warehouse! That's why you need to include information about how your items will be returned to you.
You need to know how long your products will be able to stay in their warehouse as you make other arrangements, and they need to know whether to expect a payment while your products are still there.
Post-termination plans can ensure that you end your relationship in a professional way, no matter what the cause of the termination may be.
Make sure to consider the information in this article before signing any distribution agreement. If you have any questions, be sure to get in touch with your contacts at the distribution company. That way, your questions can be answered, and any concerns can be addressed.